Market Commentary

While most global markets enjoyed a bumper 2024 overall, the much-anticipated “Santa Claus rally” failed to materialise in the final month of the year, as uncertainty around Trump’s policy plans and continued economic and geo-political risks frayed nerves.

The US economy looked anything but weak, with annualised third quarter growth revised up to 3.1% - meaning GDP has grown by more than 2% in eight of the last nine quarters. The labour market remained resilient, too, while consumers felt confident enough to up their spending across a range of goods and services in November.

Paradoxically, this was not overly welcome news for investors, who fretted about the implications for inflation and a premature pause in the interest rate cutting cycle. The Federal Reserve didn’t exactly allay these fears. While it eased rates by another 0.25% in December as expected, it sounded a note of caution for the year ahead, signalling only two more cuts instead of the forecast four.

Meanwhile, our domestic economy remains in the doldrums, with revised economic growth indicating much deeper-than-expected recessions in both the second and third quarters of 2024. Investors fled from equities in the immediate aftermath of this recessionary revelation, but didn’t stay away for long. Auckland International Airport’s $1.3 billion stock sale also moved markets during the month, as investors freed up cash from elsewhere to participate.

Australia continued to battle a largely stagnant economic backdrop, though avoided an all-out recession. However, a stubbornly robust jobs market doused any nascent hopes that the RBA would change its tune and start lowering borrowing costs in the near future. Meanwhile, commodity-related shares bore the brunt of sluggish data out of China, while a retreat from property and bank stocks led markets lower still. Investors regained their festive spirit in the final days of the year, but it wasn’t enough to claw back earlier losses.

Against this backdrop, the S&P 500 finished December down -2.5%, while the tech-focused Nasdaq eked out a 0.5% gain. The NZX 50 also managed to finish ahead (just), gaining 0.3%, while the ASX 200 ended -3.3% lower. The UK’s FTSE 100 also finished in the red, down -1.4%. The UK economy shrank for the second month in a row in October as activity virtually ground to a halt amid ongoing shock waves from the Labour Government’s budget.

GBP and AUD / NZD exchange rate change from 30 November to 31 December 2024:

  GBP and AUD / NZD exchange rate change from 31 December 2023 to 31 December 2024: